The company Toys R US files for bankruptcy in the US and Canada. The objective of Toys R Us bankruptcy filing is to enable the company to restructure its debt. The company once had a booming business in the US, but now it struggles to earn money against online retailers like Amazon.
Toys R Us Bankruptcy Creates Big Uncertainty
The Toys R Us bankruptcy creates a lot of chaos within the organization’s ranks. It is not a small or medium-size organization. Instead, the company employees around 64,000 employees with 1600 stores in different parts of the world.
Toys R Us Bankruptcy Only Limited to the US and Canada
Toys R Us bankruptcy filing only seeks protection for the US and Canadian markets. The company does not want any such protection for its presence in other markets of Europe, the UK, and Australia. Similarly, the company’s partnerships with other businesses in Asia will not get any impact.
Company to Refocus on Online Sales
There is a growing need for the organizations to start focusing on online sales. The research on online toy sales suggests an increase in internet buying. Back in 2011, all online toy sales accounted for 6.5% of the total. However, there was an increase in online toy sales to 13.7% by 2016.
Toys R Us Should Have Responded Better
Companies sometimes do not pay enough attention to a macro environment factor impacting their business. Apparently, the Toys R Us bankruptcy filing shows the organization’s leadership lacking the vision to factor in online sales. They did not focus on the changing buying patterns of their customers.
Toys R Us Seeks New Finance to Turn Things Around
Although, the Toys R Us bankruptcy filing does reflect a gloomy picture of its business affairs. The leadership at its top has not lost hope yet. The purpose of the filing is to restructure the funding to enable the company to become viable again in the longer run.
JPMorgan bank syndicate and some other institutional lenders will lend over $3 billion to help Toys R Us turn things around. The company’s balance sheet currently shows a loan of $5 billion. The new funding will help the company restructure its debt, in an attempt to find more money to invest in the enterprise. The leadership of the company believes; this new funding will help the company find more freedom to spend its money in the right areas to achieve business growth.
US Retailers Facing Massive Financial Problems
The year 2017 has seen many retail organizations getting into trouble. Besides Toys R Us, many other retailers are fighting to overcome their financial woes. Retailers including Sears, Macy’s, RadioShack, and J.C. Penny have each closed over 100 stores. Sports Authority, another leading retail in its niche has liquidated. Ralph Lauren has announced that it will no longer operate its Polo Store on Fifth Avenue.
Is Ecommerce the Only Reason?
Ecommerce may be considered as one of the primary reasons behind the retail industry’s struggle to survive. However, there are other underlying reasons responsible for this change. The increase in the number of malls providing look-alike products is taking consumers away from the brands.
Retail industry experts also believe that the old stores were made to satisfy the needs of the baby boomers. However, the new generation of Millennials and Gen Z customers do not necessarily have the same choices in life. Sometimes, online retailers like Amazon also take over the conventional stores.
Whereas, Baby Boomers would like stuff that was global, generic, had prestige and status. Millennials want to buy things that offer greater experience and are locally made. They want the companies behind these products to have followed all the ethics, paid their employees on time, and did take care of the environment during the production process. Therefore, the retail industry needs to do a lot of soul-searching to overcome this crisis and become profitable again.